Andhra Pradesh High Court - Amravati

K. Madhusudhan Reddy, vs Andhra Pradesh State Road ... on 23 February, 2022

    THE HON'BLE SRI JUSTICE R.RAGHUNANDAN RAO

           CIVIL REVISION PETITION No.493 of 2021

ORDER:-

      The petitioner herein had filed O.S.No.305 of 2013

before the Additional Senior Civil Judge, Kurnool against the

respondent herein for a declaration that the termination order,

dated 07.05.2013, issued by the respondent nullifying the

leasehold rights of the petitioner over the plaint schedule

property till 02.05.2006, is bad and for consequential

permanent injunction restraining the respondents from

evicting the petitioner from the schedule premises, for the

lease period of 20 years from 02.05.2006 onwards.

2. In the course of the trial, the respondent sought to

mark the deed of license dated 02.05.2006. The petitioner

contended that the said deed has all the trappings of a lease,

requiring registration and payment of appropriate stamp duty.

On this ground, the petitioner objected to the marking of the

document.

3. After hearing both sides, the trial Court rejected

the contention of the petitioner and permitted the marking of

the said deed of license dated 02.05.2006.

4. Aggrieved by this order dated 08.03.2021, the

petitioner has approached this Court, by way of the present

civil revision petition.

RRR,J CRP.No.493 of 2021

5. The contention of the petitioner before the trial

Court was;

The respondent had invited tenders for allotment of

shops in its bus station. The bidders were to offer bids of

non refundable deposits and monthly rents they would

be willing to pay. This allotment was to be done to

persons, who offered the highest amounts towards non

refundable bids and monthly rents. The persons who

succeed in this tender were to deposit the said amount,

which would be used for construction of the shop, and

the same would be allotted to the said bidder. The

petitioner was the highest bidder and had paid

Rs.1,34,000/- as non-refundable amount and the same

was used to construct shop No.4 which was given to the

petitioner.

The terms of the deed of license executed on

08.05.2006 stipulated that the petitioner could run only

the business of pesticides, seeds and fertilizers and not

give a sub-license to anybody else to use the shop; The

petitioner was to carry out repairs and modifications

only after approval of the respondent; The respondent

would have a right to terminate the contract of license

by serving three months notice.

6. The petitioner relied upon the Judgments of the

Hon'ble Supreme Court in Pradeep Oil Corporation vs.

RRR,J CRP.No.493 of 2021

Municipal Corporation of Delhi and another 1, Achintya

Kumar Saha vs. M/s.Nanee Printers and others2 and

Talari Venkatamma vs. Malisetti Aswathanarayanappa3.

7. The respondent on the other hand contended that

the suit schedule property was handed over to the petitioner

to do fertilizer and seeds business and there is no provision

disclosing that possession of the property was handed over to

the petitioner exclusively.

8. Heard Sri Virupaksha Dattatreya Gouda learned

counsel, appearing for the petitioner and Sri N. Sri Hari

learned counsel, appearing for the respondent.

9. The issue raised, in this revision petition, is

whether the document in question, is a lease or a licence. The

distinction between the two has been set out, in the following

manner, by the Hon'ble Supreme Court in Associated Hotels of

India Ltd. v. R.N. Kapoor, (1960) 1 SCR 368 : AIR 1959 SC 1262

28. There is a marked distinction between a lease and a licence. Section 105 of the Transfer of Property Act defines a lease of immovable property as a transfer of a right to enjoy such property made for a certain time in consideration for a price paid or promised. Under Section 108 of the said Act, the lessee is entitled to be put in possession of the property. A lease is therefore a transfer of an interest in land. The interest transferred is called the leasehold interest. The lessor parts with his right to enjoy the property during the term of the lease, and it follows from it that the lessee gets that right to the exclusion of the lessor. Whereas Section 52 of the Indian Easements Act defines a licence thus:

"Where one person grants to another, or to a definite number of other persons, a right to do or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does not

2011(5) SCC 270

2004(12)SCC page 368

LAWS (APH) 1983-9-32.

RRR,J CRP.No.493 of 2021

amount to an easement or an interest in the property, the right is called a licence."

Under the aforesaid section, if a document gives only a right to use the property in a particular way or under certain terms while it remains in possession and control of the owner thereof, it will be a licence. The legal possession, therefore, continues to be with the owner of the property, but the licensee is permitted to make use of the premises for a particular purpose. But for the permission, his occupation would be unlawful. It does not create in his favour any estate or interest in the property. There is, therefore, clear distinction between the two concepts. The dividing line is clear though sometimes it becomes very thin or even blurred. At one time it was thought that the test of exclusive possession was infallible and if a person was given exclusive possession of a premises, it would conclusively establish that he was a lessee. But there was a change and the recent trend of judicial opinion is reflected in Errington v. Errington [(1952) I All ER 149] , wherein Lord Denning reviewing the case-law on the subject summarizes the result of his discussion thus at p. 155:

"The result of all these cases is that, although a person who is let into exclusive possession is, prima facie, to be considered to be tenant, nevertheless he will not be held to be so if the circumstances negative any intention to create a tenancy."

The court of appeal again in Cobb v. Lane [(1952) I All ER 1199] considered the legal position and laid down that the intention of the parties was the real test for ascertaining the character of a document. At p. 1201, Somervell, L.J. stated:

"... the solution that would seem to have been found is, as one would expect, that it must depend on the intention of the parties." Denning, L.J. said much to the same effect at p. 1202: "The question in all these cases is one of intention: Did the circumstances and the conduct of the parties show that all that was intended was that the occupier should have a personal privilege with no interest in the land?"

The following propositions may, therefore, be taken as well established: (1) To ascertain whether a document creates a licence or lease, the substance of the document must be preferred to the form; (2) the real test is the intention of the parties -- whether they intended to create a lease or a licence; (3) if the document creates an interest in the property, it is a lease; but, if it only permits another to make use of the property, of which the legal possession continues with the owner, it is a licence; and (4) if under the document a party gets exclusive possession of the property, prima facie, he is considered to be a tenant; but circumstances may be established which negative the intention to create a lease. Judged by the said tests, it is not possible to hold that the document is one of licence. Certainly it does not confer only a bare personal privilege on the respondent to make use of the rooms. It puts him in exclusive possession of them, untrammelled by the control and free from the directions of the appellants. The covenants are those that are usually found or expected to be included in a lease deed.

RRR,J CRP.No.493 of 2021

The right of the respondent to transfer his interest under the document, although with the consent of the appellants, is destructive of any theory of licence. The solitary circumstance that the rooms let out in the present case or situated in a building wherein a hotel is run cannot make any difference in the character of the holding. The intention of the parties is clearly manifest, and the clever phraseology used or the ingenuity of the document- writer hardly conceals the real intent. I, therefore, hold that under the document there was transfer of a right to enjoy the two rooms, and, therefore, it created a tenancy in favour of the respondent.

10. Following this judgment, the Hon'ble Supreme Court in

Pradeep Oil Corpn. v. MCD, (2011) 5 SCC 270 : (2011) 2 SCC (Civ) 712 :

2011 SCC OnLine SC 583 at page 283 held as follows:

32. In view of the aforesaid well-settled legal position, whether a particular document will constitute "lease" or "licence" would inter alia depend upon certain factors which can be summarised as follows:

(a) whether a document creates a licence or lease, the substance of the document must be preferred to the form;

(b) the real test is the intention of the parties--whether they intended to create a lease or a licence;

(c) if the document creates an interest in the property, it is a lease; but if it only permits another to make use of the property, of which the legal possession continues with the owner, it is a licence; and

(d) if under the document a party gets exclusive possession of the property, prima facie, he is considered to be a tenant; but circumstances may be established which negative the intention to create a lease.

11. In Achintya Kumar Saha vs. M/s.Nanee Printers

and others4, and Bharat Petroleum Corporation Ltd., vs.

Chembur Service Station5, the Hon'ble Supreme Court, had

again reiterated these principles, which need to be applied in

the present case.

2004(12)SCC page 368

(2011) 3 SCC 710

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12. The document is titled as a Deed of Licence.

However, as held above, the said description cannot be the

basis for determining the nature of the document. It is to be

seen whether, the document, implicitly or explicitly, either

creates an interest in the property or gives exclusive

possession of the property to the Petitioner. The deed of

licence contains 34 clauses. The relevant clauses are,

extracted below:

Clause-1: The license is for a period of 20 years (Twenty Years only) commencing from 8.5.2006 to 7.5.2026. On completion of 20 years license period the licencee has to vacate the shop/stall and hand over the possession to the Corporation. No extension of license period will be allowed beyond 20 years.

Clause-7(a): On completion of the 20 years licence period, the licensee has to vacate the Shop/Stall and handover the vacant possession to the Corporation. If the licensee fails to vacate the premises and hand over the vacant possession to the Corporation, the licensor will be entitled to take physical possession of the premises without resorting to any other legal remedies. Clause-13 (b): If the licensee vacates the shop/stall without prior intimation the security deposited will be forfeited and the outstanding amount if any towards monthly license fee, electricity and water charges, penalty for belated payment of licence fee, water and electricity charges etc., will be adjusted.

Clause-23 (f): If the licensee vacates the shop/stall without prior intimation the security deposit will be forfeited and the outstanding amount if any towards monthly licence electricity and water charges, penalty for related payment of licence fee etc., will be adjusted.

13. These clauses show that the Petitioner is being

put in physical possession. There is no clause in the

agreement which reserves a right to the respondent to

introduce any other licensee into the shop, during the period

of the license. It must be held that the petitioner has been put

RRR,J CRP.No.493 of 2021

in exclusive physical possession of the shop. Even at this

stage, it would still be open to the Lessor/Licensor to point out

any circumstances which negative the intention to create a

lease. No such circumstances have been pointed out by the

respondent. The transaction is a lease and not a license. The

document in question is a lease deed and the trial court would